Akamai Stock Is Down 20%, What’s Next?

October 10th, 2025 by Trefis Team
-1.92%
Downside
88.49
Market
86.79
Trefis
AKAM: Akamai Technologies logo
AKAM
Akamai Technologies

Akamai (NASDAQ: AKAM) isn’t a broken story — it’s a transition story. The stock’s 20% drop this year appears harsh in comparison to the S&P 500’s 15% gain, but the selloff reflects skepticism, not a collapse. The company is transitioning from its legacy content delivery business to faster-growing areas, including security, application protection, and cloud infrastructure. That pivot will take time, but it’s also what could make Akamai interesting for investors with patience. We discuss more below.

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Why the Stock Struggles Now

The near-term problem is growth or the lack of it. Akamai’s 2025 revenue outlook disappointed, signaling that new businesses haven’t yet offset declines in its core CDN segment. Investors see a company still in transition: profitable and cash-rich, but searching for renewed momentum.

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That’s why Akamai has become a “show-me” stock — one that trades sideways until management proves the strategy works. The market is waiting for evidence that its new offerings in cybersecurity, edge computing, and API management can deliver meaningful revenue acceleration.

Why It’s Still in Focus

Several factors have kept Akamai in the spotlight:

  • Weak guidance has made investors cautious, though not panicked.

  • Valuation has compressed, with shares trading well below their 52-week high — potentially attractive if growth stabilizes.

  • Competition from cloud giants like Amazon and Google has hurt its CDN business, but also expanded the cybersecurity market Akamai now targets.

  • Speculation about major customer contracts or even M&A activity continues to spark market chatter.

In other words, the stock’s current malaise isn’t just about fundamentals — it’s about credibility. Can Akamai convince investors it can grow again?

Under the Hood: Still Solid

Beneath the market noise, Akamai’s financials remain strong. The company generates healthy cash flow, with operating margins above 15% and free cash flow margins north of 30%. Annual revenue growth has been modest, around 4 to 5%, but the company’s balance sheet strength, with about $5.3 billion in debt against an $11 billion market cap and nearly $1 billion in cash, gives it breathing room to invest and evolve.

In downturns, AKAM stock typically falls harder than the S&P 500 — but also rebounds faster once confidence returns. That pattern reflects a business tied to internet activity and enterprise spending: cyclical, yes, but not fragile.

The Takeaway

So, buy or fear Akamai stock?

For short-term traders, the story is unexciting: growth will stay muted while the company transitions. But for long-term investors, the setup looks better. Akamai trades at a discount to the S&P 500, with a price-to-sales ratio of about 2.7 versus 3.3 for the index, with strong cash generation and a credible path to re-accelerating growth through security and edge computing. For short-term traders, the story is unexciting: growth will stay muted while the company transitions. But for long-term investors, the setup looks better.

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